RABBIT HUNT — In an industry filled with creative types, why hasn’t somebody come up with a way for agencies to retain control of their best ideas? By MICHAEL SCHRAG

Chiat/Day doesn’t own the Energizer Bunny it c

Stupidly and self-destructively, the advertising industry has lashed itself to an outmoded compensation structure that guarantees its finest efforts will be undervalued and commoditized. While other businesses recognize the importance of intellectual property, advertising still sells its best work ‘for hire.’ This is no way for a creative industry to build a valuable intellectual property franchise.Advertising needs to strike a new, mutually beneficial compact with clients – one which recognizes that agencies should be compensated for the quality and effectiveness of their ideas, not just the quantity of the media budget. Does anybody believe Creative Artists Agency wants the same kind of compensation as McCann-Erickson for its work on Coca-Cola? Agencies must partially or completely own – through copyright and contract – the ideas, characters and campaigns they create.‘It’s an interesting proposition that does have important ramifications,’ says Jay Chiat. ‘But I don’t think anybody’s figured out how to do it. . . . Why do agencies that despise the opportunity to do spec do spec?’But that’s what leadership and vision is all about. If you’re in the business of creating and selling ideas, then that’s how you should be compensated. ‘It’s a really interesting idea,’ says Dick Sittig, cd at Chiat/Day, N.Y., and one of the Energizer Bunny creators. ‘In hindsight, owning at least part of the Bunny wouldn’t have been a bad thing for us.’Says former LGFE president Arthur W. Einstein, now a marketing communications consultant, ‘The songwriters get residuals, the actors get residuals, other creative people get residuals, why not us? It’s not as if the rest of the world isn’t already doing it this way. I mean, I even pay a licensing fee for my personal computer software.’Wouldn’t the non-advertising licensing rights to an Energizer Bunny, a Joe Camel or a Spuds MacKenzie be of some value? Wouldn’t it make sense for an agency to have an equity interest in its prize-winning campaigns?There’s no law that prohibits agencies from retaining or sharing title in its work – only outdated practice and tradition. The real issue here is what kind of relationships do clients and agencies want? What relationships are most likely to lead to the best, most creative and most effective ideas?Precisely because a client can consistently get its agency to ‘give away’ the creative crown jewels for commission, many clients simply don’t know how to value creativity financially. And precisely because agencies retain no title to their creations, there’s no incentive to reinvest continually in them.What incentive might a client have to let the agency keep a piece of the intellectual property action? What client in its right mind would give up its creative ‘free lunch’?Well, smart clients understand the meaning of the phrase ‘mutual interest.’ They care about their own brand equity, and they will recognize that an agency may perform better if it retains equity in its creations. A clever agency could simply offer a client a deal (We’ll cut the commission in half if you let us retain certain rights to the characters in this campaign.)Property rights, like commissions, are negotiable. No doubt some clients will never give up anything, while other clients might give away too much. Similarly, some agencies will retain rights and do well, while others will end up retaining 50% or 100% of nothing. Some deals will be exclusives and others will require compulsory copyrights. Regardless, intellectual property has to move to the negotiating table if agencies are to establish themselves as creative entities.Far too much of the debate surrounding the future of advertising has focused on the wrong issues. If the industry’s future is integrated marketing, by all means, become an integrated marketer. If it is direct response, then become best-of-breed in direct response.But if the future of advertising lies in creative people designing characters, creating campaigns and devising innovative ideas for clients, then for gosh sakes, retain some rights to the intellectual property values created. Michael Ovitz and the Hollywood Gang know this and act accordingly. That’s why they’re rich. The Jay Chiats and Dan Wiedens know it, too. It’s time for them to act, too.Please fax comments to Michael Schrage at 212-529-7845.Copyright Adweek L.P. (1993)